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10th March 2026
Cappuccino Commentary
February 2026 Review
Markets contended with several major macroeconomic events over the month. The US Supreme Court ruled that President Trump was not authorised to impose tariffs under the International Emergency Powers Act (or IEEPA). In response, Trump complied with the ruling however pivoted to alternative measures, issuing a 10% tariff on all countries based on another statute (Section 122 of the Trades Act of 1974). Last week, Trade Secretary, Scott Bessent announced that the 10% tariff will soon be increased to 15%.
Tariff tribulations were overshadowed at the end of the month when the US and Israel launched a series of airstrikes and military operations in Iran that led to the assassination of Iranian Supreme Leader Ayatollah Ali Khamenei. Iran’s response was swift and included military retaliation across the region against Israel and several other Gulf states. So far, low cost Shahed drones have proven to be particularly effective at evading more expensive higher-tech air defences. Needless to say, things are moving very fast at the moment and there’s different developments to digest every day. From our perspective, it’s important to avoid making kneejerk reactions and focus on diversification to help weather market volatility.
Focusing on markets, global equities posted gains (+2.80%) in February. Many of the themes dominating the end of 2025 have continued into 2026 causing the US equity markets to stay somewhat subdued (+1.5%) while other developed markets and emerging markets (+7.2%) carried on outperforming. Looking at developed markets, Japan was a standout returning +10.4% in February alone. This was driven by Prime Minister Sanae Takaichi’s Liberal Democratic Party (LDP) winning a landslide election victory, securing more than two thirds of all seats in the lower chamber. It was the largest political victory in modern Japanese history and markets reacted positively to the clear signal on the country’s political and economic direction. UK equities also posted decent gains of 6.4% driven by large cap names and sectors that benefited from both the AI rotation and concerns about rising oil prices.
US equity returns have been modest, returning just under 1% so far this year. Interestingly, we have seen a meaningful rotation away from mega-cap US technology and growth names over the past couple of months. While some earnings remain strong, there have been concerns about the likely return on investment from artificial intelligence (AI). Companies who have announced more capital expenditure have typically been punished, for example early in the month Amazon had $300bn wiped off their market capitalisation when they reported a 25% higher than expected increase in capital expenditure.
Worries about the impact AI agents and tools will have on software and wealth management firms dragged share prices down in both sectors. In the final week of February, a viral ‘doomsday’ essay by Citrini Research spooked investors, sparking another sell off that hit firms like Uber and Mastercard particularly hard. Conversely, we’ve started to see other areas such as value and small to mid-cap stocks start to outperform, benefitting the more diversified way we’ve positioned our portfolios.
Bond markets posted decent gains, particularly in the latter half of the month. Growing economic uncertainty, moderating inflation signals and increasing geopolitical risks all helped push bond prices up. Expectations of lower interest rates helped infrastructure related investments while gold also benefitted from geopolitical uncertainty (+7%).
We’ve been talking about diversification outside of the US markets for some time now. We’ve been targeting cheaper valuations in other regions, helping us move away from the concentration of tech and AI that currently dominates the US market. Generally, after a strong start to the year there will undoubtedly be bumps in the road, but even this early into the year “avoiding the noise” seems to be the key message.
Please note:
For regulated financial advisers and investment professionals only. Copia does not provide financial advice, and the contents of this document should not be taken as such. The value of investments can increase and decrease, past performance and historical data cannot guarantee future success, and any references to individual stocks or asset classes are made purely for illustrative purposes.
The performance of each asset class is represented by certain Exchange Traded Funds and Passive Funds available to UK investors and expressed in GBP terms selected by Copia Capital Management to represent that asset class, as reported at last UK market close before the end of the calendar month. Reference to a particular asset class does not represent a recommendation to seek exposure to that asset class. This information is included for comparison purposes for the period stated but is not an indicator of potential maximum loss for other periods or in the future.